The development costs of the last remaining solar project to receive Contracts for Difference (CfD) funding have spiralled following the UK’s decision to leave the EU.
Brexit’s impact on exchange rates have added more than £400,000 to the equipment costs of the project, with additional grid connection fees of £120,000 adding further expense.
But despite the added costs, Cambridge County Council CFO Chris Malyon told Solar Power Portal this morning that the project was not at risk of collapse.
Triangle Farm, a 10MW project slated for land in the Soham area, was one of five solar farms to be successful in the first CfD auction in February last year. Two of those projects were almost immediately cancelled having been submitted at unviable strike prices of £50/MWh, leaving three remaining projects at £79.23/MWh.
However the development of these projects has been far from straight forward. Netley Landfill had its CfD terminated in March this year after its developers Renewable Energy Group came into difficulty and could not negotiate an extension with CfD administrators Low Carbon Contracts Company.
In May, SPP reported that the Triangle Farm project had been delayed as a result of grid capacity issues in the area, which UK Power Networks was working with the council to resolve.
Its development has now been further hindered by the Brexit vote. A report issued by Cambridge County Council’s general purposes committee revealed that the council had opted for an open order book policy and while modules for the project had been ordered in advance, a price had not been fixed.
Currency fluctuations since the Brexit vote – the pound’s value has dropped by circa 11% since July – have meant the cost of importing the modules has spiralled.
The council report claimed that the decision for an open order book had been taken after it was considered that it was more likely that costs would fall than increase.
Speaking to SPP, Malyon insisted that while these added costs had impacted upon its margin, there was no current risk of the project collapsing.
“Although it reduces the overall level of return on the project, it's still above the baseline which members set for 7%, which is the level of return we require. It just about covers that now, so there's no additional margins, but it's not in jeopardy,” he said.
Costs have further risen after the council had to pay more than £100,000 in additional grid charges. These issues had set the targeted operational date back from an original date of 1 July 2016 until October at the earliest.
But Malyon this morning said this was now not expected until around January, and LCCC currently has a target operational date for the project of 1 January 2017.
To date, Lightsource’s Charity Farm array is the only CfD project to be connected to the grid following its completion in June.
Additional reporting by David Pratt.